How Disney is approaching its digital transformation and fighting disruption

However, if you have been following Disney closely for the last few years, it will be more apparent that this move was a fundamental part of the plan to avoid being disrupted by Netflix.

In order to stave off the type of disruption that Netflix inflicted on Blockbuster, Disney has had to execute a multi year plan, that is now beginning to take shape.

The result is an approach that at the very least provides a template for how to execute a digital transformation strategy in the face of competition.

Investing in the tech through acquisition

Through the success of Netflix, it has long been acknowledged that digital streaming will have a profound impact on how consumers find and watch video content.

However, when Netflix started investing in buying and producing its own content, rather than just distributing content, it turned its content suppliers, including Disney and Fox, into competitors.

Therefore in order to prevent Disney from becoming obsolete, or at the very least, a heavily commoditised part of the value chain, Disney invested in technology that allowed it integrate vertically, just as Netflix laddered up by producing its own content.

This is something that Disney theoretically could have done by building the technology in-house. However, it opted to invest in BAM-tech, a sports video streaming technology on a multiyear basis, ultimately becoming majority owner in August 2017.

Not only did this approach allow Disney to save time, but it also enabled the business to acquire significant domain expertise, as BAMtech arguably has the best streaming technology of any organisation not named Netflix.

However, while it gave Disney the technical backbone needed to create a Netflix competitor, there is more to a streaming service than just the technology.

Understand the new value proposition

While the end result of consumers watching content is the same, doing this via a streaming platform, instead of through a cable operator means a necessary change in how Disney views its value proposition.

Rather than just creating differentiated video content that can be bundled into channels and sold to cable distributors and advertisers, a streaming service means a direct relationship with the consumer, ultimately cutting out the cable operators entirely.

This is relatively similar to the experiences of commerce brands needing to consider their own direct to consumer channels, to the potential determent of sales through distributors and retailers.

However, with the barrier to entry much higher for a streaming platform, it was important for Disney to test some assumptions first. This led to the company creating a subscription platform called “Disney Life” in 2015 as a place to experiment in a restricted numer of markets.

Not only were there valuable lessons and experiences acquired in creating appropriate customer experiences and journeys, it provided core insights on what consumers were looking for. As early as March 2016, Disney CEO Bob Iger can be quoted saying that the service has shown them that consumers are drawn to the television and film content, over the books and video games.

Improving the “product”

Despite this insight, the Disney Life experiment has not gone well from a commerical standpoint – and this was in large part due to the insight above.

The key differentator for a streaming platform is providing access to content that isn’t available anywhere else. However for the most part, most of the television and film content on the Disney platform still available through its cable and distribution partners.

This realisation is what caused the media brand to decide that Marvel and Star Wars titles will be streamed exclusively on the new Disney streaming platform when it launches, after initially being on the fence regarding the distribution of the marquee franchises.

This is also the context in which the Fox properties were acquired – Disney now has (exclusive) access to an extremely large content library full of premium content, not only making their offering stronger, but also making Netflix weaker, as they remove most Disney and Fox programming from Netflix over the coming years.

Is Disney in the clear?

To be clear, the degree to which Disney was in any real trouble was small. However, this transformation is about more than just surviving the Netflix; this is Disney’s play to maintain and solidify its position as the worldwide leader in media and entertainment.

That said, despite Disney’s impressive execution of it’s strategy in such a short space of time, there is still more to go. Not only do they need to wait for the Fox acquisition to be approved, but they still need to create a streaming experience that works and scales, even at the expense of its cable oriented businesses.

This is particularly key for a legacy organisation like Disney, as it will always have it’s golden era of television dominance as a benchmark – a dominance that still contributes a significant amount towards its profits.

While it certainly has a responsibility to create as much value as possible, becoming a full stack streaming business is very different to being a content production house.

However, what Disney seems to have recognised and what every other company that goes through its own transformation should appreciate, is that it should be judged not on its ability to replicate or surpass the profits of its glory days, but on its ability to effectively compete today and beyond.


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